What Documents Should Be Maintained for Transfer Pricing?

The required documentation is divided into two categories, "principal" and "background" documents. There are nine types of "principal" documents; these are the ones that must exist when the entity files a U.S. tax return. The nine categories of information the IRS expects to see are:

• Overview of the taxpayer's business.
• Description of the taxpayer's organization structure.
• Documentation explicitly required by the Internal Revenue Service Regulations under Section 482- related specifically to cost sharing arrangements and market share strategies.
• Description of the method selected and an explanation of why that method was used.
• Description of alternate methods that were considered and an explanation of why these were not selected.
• Description of the controlled transactions, including functional and risk analysis, and any internal data used to analyze those transactions.
• Description of the comparables that were used, how the comparability was evaluated and what adjustments were made.
• Explanation of the economic analysis and projections relied upon in developing the pricing method.
• General index of the principal and background documents and a description of the recordkeeping system used for cataloging and accessing those documents.

A Piascik & Associates, P.C.'s transfer pricing study results in well-reasoned, defensive transfer pricing policies. We will review current documentation and identify any potential risks while at the same time determining tax planning opportunities.